I appreciate the cordial discussion; this is a subject that in my experience touches a lot of raw nerves, so it is difficult to find people who can discuss the topics with a friendly tone.

I believe the answer to many of your questions can be addressed by seeking the answer to another question. How did the upper 10% (mostly the upper 0.1%), manage to capture over 90% of the income gains in the past few decades in America?

Consider that in a typical residential single family home in one of the hot real estate markets like SV, most of the valuation is embedded in the land and not the improvements. You can confirm this by checking the values SFH's are insured for; the insurance companies aren't stupid. If homes really appreciate in value, then their intrinsic utility modulo their location is expected to rise, and their insurance valuations to correspond. They don't.

In other words, most people aren't improving their houses to the extent justifiable by the inflation of the valuation placed upon them over time. The inflation goes into the dirt. There are two entities that mostly benefit from this: the local property tax assessment jurisdiction, and the bank. The upside for them in this arrangement is much more immediate than for the typical home debtor. A junior beneficiary is the real estate agency. Under very specific circumstances, a new home developer also stands in line to financially benefit before the home debtor does.

A home debtor's financial upside is mostly realized at the tail end of the life cycle of the transaction, when they sell (there is a significant sidebar here on whether or not selling is desirable). Most US federal tax filers take the standard deduction and even the MID doesn't benefit them.

If some outlier upgraded a house to boast its own energy production (like with solar and biogas), sewage treatment (like with constructed wetland), highly-automated integrated cycle aquaponics/vermicomposting/agriculture setup, and so on, and was able to sell a surplus production/handling capacity to their neighbors, I will grant that such a house has intrinsic wealth and its improvements justify an increasing valuation. But absent that kind of actual productive capability, most houses only sell based upon prevailing wages.

This is a very bad arrangement for the middle class because it strands a lot of capital into dirt for financialization purposes, instead of actually improving the house itself. If that stranded capital was put to use in upgrades that make a house easier to maintain, longer-lasting, more sustainable, more economical to operate, just about anything other than inflating a principal number so the returns from a percentage on that principal increase, then the middle class would actually immediately benefit from their houses.

The middle class in aggregate is not organized enough to generate on demand such an aggregate comparative advantage that they temporarily possessed about 5-6 decades ago anytime soon again, and waiting for history to hand it another such comparative advantage would be folly. My guess at a solution is for individuals within the middle class to find their own localized and organized comparative advantages.

This is kind of going far astray of HN's charter, so to pull us back towards a more HN-friendly territory, I will leave this response at the following. For the majority of actors in most real estate transactions for residential real estate for occupancy by owner, very few benefit from an increasing price that is misaligned with thirty-year sustainable prevailing income trends. In the specific HN-oriented context of technology business owners and employees, each dollar spent on residential housing not spent on improving the future valuation of employees and owners can be considered a flat, deadweight loss to the venture. I would personally much rather have my capital (of all sorts) working for me in my venture or directly improving my valuation where I have far more relative control over the outcome, than stranded in dirt and subject to the capriciousness of prevailing wages where I have far less relative control.